Private equity's allure poses big risks for the stock market and its investors in the next recession

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Private equity is rising in prominence and presents potential issues for stock markets and retail investors.

Private equity is becoming the go-to for active investors — a trend which AllianceBernstein expects to continue for the next decade.

The transition is already underway and according to asset manager AllianceBernstein, won't be ending soon. In a note to clients this week, the firm outlined an upcoming decade in which the "main expression of active investing" is in private markets. "Given the momentum behind this reallocation, we think we may never again see a situation where the bulk of active risk is taken in public markets," Fraser-Jenkins said.is at historic highs at almost $1.1 trillion last year, according to Preqin Private Equity and Bernstein analysis. At the same time, the amount of publicly listed companies is shrinking, and the U.S. public market is shrinking compared to the rest of the world.

BlackRock CEO Larry Fink warned against too much allocation into alternative investments at a conference in Boston this week. The CEO said that investors may be over-allocating to alternatives as liquidity dwindles, Bloomberg"That doesn't mean having more alternatives is bad — it may be perfectly good," Fink said, according to the report. "Let's be clear that with alternatives you're trading liquidity for more return.

As a result, the average age of companies going public has increased. Uber for example, spent a decade as a private company before heading for a listing debut on the New York Stock Exchange this week.For instance, ride-hailing company Lyft had a market capitalization of $15.6 billion this week after starting out around $22 billion the day it listed. Its last private valuation was $15.1 billion, according to Pitchbook.

 

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Very good article to explain how the stock market has turned into the public’s “bank” too big too fail and how Wall Street is destroying America & democracy by segregating investors into wealthy “qualified” and poor “suckers”.

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